Wisconsin's hospitals, clinics must transform to survive under ACA

Nov. 21, 2013

Dr. William Benn, left, checks out Austin Everson of Amherst Junction, right, while nurse Amy Limberg, center, takes notes at the Marshfield Clinic Stevens Point Center in Stevens Point,. The Stevens Point Center, which opened Nov. 4, has staff areas in between exam rooms allowing for patients to go directly to their exam rooms without seeing their doctors at work. The staff areas allow for collaboration between doctors and nurses as they work side by side. / Megan McCormick/News-Herald Media

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Gannett Wisconsin Media Investigative Team

Dr. William Benn, left, works in the Marshfield Clinic Stevens Point Center staffing area in Stevens Point on Nov. 20. The Stevens Point Center, which opened Nov. 4, has staff areas in between exam rooms allowing for patients to go directly to their exam rooms without seeing their doctors at work. The staff areas allow for collaboration between doctors and nurses as they work side by side. / Megan McCormick/News-Herald Media

Special report

The Affordable Care Act will touch nearly every American. Gannett Wisconsin Media is examining the most important issues in a series called “Health Care Reform & You.” The stories focus on helping you understand what you need to do, how to do it and how to get help. Installments mostly appear on Sundays and Mondays, but we’re also reporting on related news developments as they happen. ONLINE: For more information about the changes and to read past stories, click on www.stevenspointjournal.com/healthcarereform.

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Wisconsin hospitals and medical clinics are bracing for significant changes to the way they do business because of federal health care reform.

Many providers have already begun diverting resources away from direct patient care to staff centers tasked with researching more efficient ways of delivering care. Some are announcing cutbacks in anticipation of major portions of the Affordable Care Act going into effect next year.

Some providers warn the health care law creates an unsustainable healthcare system that will eventually crash under financial pressure.

And yet others have accepted it as a welcome challenge to offer more holistic treatment to patients.

Both sides agree they’re in the midst of a major transition, and they must change their model to survive.

President Barack Obama’s signature legislation tries to shift the healthcare industry from a financial model that pays for volume of treatments to one more focused on quality of care. As this transition occurs, providers must live between two different worlds — one where they’re still paid per procedure and another where they’re forced to improve at the same time that they must hold the line on costs.

To force this change, the law limits planned increases in Medicare reimbursements to put the brakes on escalating health care costs. The law also creates opportunities for providers to share in Medicare savings as an incentive to work more efficiently. And, it penalizes those medical providers who don’t continue improving quality while these changes take place.

Some doctors warn the system is fundamentally flawed because it forces them to operate at a loss, and, the financial incentives to focus on quality only apply to patients on Medicare, not those who pay with private insurance.

Doctors may find themselves in the position of losing money, which could lead to them turning down care for Medicare recipients or raising prices on everyone else to further subsidize people already receiving government assistance, said Dr. Ashok Rai, president and CEO of Green Bay-based Prevea Health.

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“There’s a breaking point I’m not sure as providers we’ve hit yet, but it’s like a speeding train heading right at us,” he said.

Tom Oliver, professor of medicine and public health at the University of Wisconsin said providers should not blame the health care law for their financial concerns. Those who fully embrace the reforms should thrive, he said.

“An awful lot of the major financial aspects of the Affordable Care Act haven’t even started, so how can they say it’s that? I think it’s finding an easy target to blame,” he said.

Challenges ahead

In January, Aurora Health Care announced an unspecified number of layoffs due to an estimated loss of $13 million stemming in part from the new federal health care law. Milwaukee-based Ministry Health Care announced in May it would need to cut up to the full-time equivalent of 250 positions. In October, the St. Louis-based nonprofit SSM Health Care, which runs several hospitals in the greater Madison area, announced it would also lay off an unspecified number of workers.

“If you look back over the past four or five years, we’ve continued to try and improve our cost structure. We wanted to do it even before the recent legislative changes came into effect because we wanted to be a better provider for our patients,” said Brad Hahn, executive vice president of finance for Aurora Health Care’s northern markets, which include 15 hospitals in Oshkosh, Green Bay, Sheboygan and other parts of eastern Wisconsin.

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“The challenge as we move forward is those things can only go so far,” Hahn said.

One reason for the layoffs is the anticipation of mandatory cuts to planned Medicare reimbursements starting next year. The ACA is paid for in part by cutting more than $700 billion in planned spending from the government’s health insurance program for the elderly over the next 10 years.

The federal government reimburses hospitals for Medicare patients at a fixed rate based on the diagnosis. Those rates are increased annually to cover the rising costs of care. The ACA cuts these increases by about 1.1 percent, Oliver said.

Providers say the impact will be significant.

Medicare covers more than one-fifth of health care costs in the United States, according to the Centers for Medicare and Medicaid Services.

The federal government wants medical providers to try reducing Medicare costs even more by delivering care more efficiently, and, therefore, limiting the number of treatments given. Providers that do this may qualify for a payment from a portion of the money they save the government.

Dean Gruner, a physician and CEO of ThedaCare, said this puts medical providers in a tough position of willfully losing revenue. He said his organization has decided to embrace the changes because he believes it’s in the best interest of patients to offer cheaper, higher-quality care.

“Why would a logical business try to purposely shrink its revenue base? Well, the answer is that’s not very logical for most businesses, but it would be a good thing for our country,” he said.

ThedaCare saved Medicare $7 million in 2012 through a number of operational changes, including cutting out duplicate or unnecessary treatments and tests for patients, Gruner said.

He did not say how much of that savings the government gave back to ThedaCare. However, he did say it was only a portion of the $7 million.

ThedaCare has committed to a no-layoffs policy. Any deficit created by the changes will be absorbed by organizational restructuring and other operational efficiencies, Gruner said.

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“We’re trying to do the best things that our customers want, and we’re trying to figure out the finances as we go,” he said.

A two-tiered system

Further complicating the transition for health care providers is the unequal treatment of patients by the ACA. Since the financial incentives for improving quality only apply to Medicare funding, medical providers have no way of recouping lost revenue from efficiencies to care for patients paying with private insurance.

All providers interviewed by Gannett Wisconsin Media said they won’t treat patients differently based on how they pay. Medical providers say they won’t turn down Medicare patients because they pay less and won’t charge people with private insurance any more to make up the difference. Their only other option is to swallow the costs, they say.

“It is just a big problem for us, though, when you get paid one way for one group of people and another way for another group. It’s mixed incentives for what you do,” said Gruner. “We try to work with our team to do the right thing for all of our customers. That said, it’s more difficult to do that when you have constant pressure to make ends meet with the same or less amount of money.”

Prevea Health’s Rai said he’s afraid the new system is even less sustainable than the one before the ACA.

“Can we support a population that we sometimes are paid only 17 cents on the dollar, or shift so much onto the private insurance payers that they can’t afford to come anymore? There’s a breaking point. I’m not sure we know what that breaking point is, but it’s not too far away,” he said.

Oliver said he doesn’t believe this divide will last for long or create the problems healthcare providers warn about.

“What happens historically is when Medicare goes down this path with new ideas, the rest of health insurance follows along. It is a national program and has more people in it than any other health program in the world,” he said.

Changing care

Dr. Kori Krueger, a pediatrician for Marshfield Clinic, said the new landscape created by the Affordable Care Act requires a change in thinking. But he says it isn’t a “seismic shift.” He believes a quality-focused model is within reach.

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Krueger works part-time as the director of an Accountable Health Organization, a special center made possible by the ACA that helps providers find ways to cut costs and improve care. He said the effort requires an investment from providers, but there’s a payoff in the form of better care for patients.

“As a physician, I’m agnostic to who the patient’s payer is. That doesn’t mean I don’t care, but when I practice one-on-one with the patient, I don’t change what I do based on what that person’s method of payment is,” he said.

Some of the simplest changes meant to improve the quality of care while cutting costs include improving records management, using more of a team approach to diagnosing and treating illnesses and being more thoughtful about what procedures and tests to use, he said. More complex changes include researching the most effective treatments.

“That investment is very real for our organizations, but the private payers as well as government payers are recognizing that’s a good return on investment for them if they develop those types of payment models,” Krueger said.

“I think it’s a very good thing for patients in terms of focusing on value, and it’s a good thing for providers because it makes you think about what is the truly best thing for patients in every regard,” he said.